Attorney General Mukul Rohatgi has asked the Income Tax Department to desist from filing appeal against the Bombay High Court ruling that Vodafone is not liable to pay an income tax demand of Rs 3,200 crore in a case relating to transfer pricing. "I have asked the income department to accept the judgement of the High Court. I have said in my opinion don't file an appeal," Rohatgi said.
The Attorney General said he was in agreement with the view taken by the CBDT Chairman in the matter. "I have concurred with the view of the CBDT chairman," Rohatgi said. His opinion comes in the backdrop of reports that the income tax department was keen on challenging the October 10 judgement of the High Court verdict.
The High Court had given a big relief to the UK-based mobile service provider by ruling that it is not liable to pay an income tax demand of Rs 3,200 crore in a case relating to transfer pricing.
The I-T Department had asked the company to pay additional income tax alleging that it had undervalued its shares in the subsidiary Vodafone India Services while transferring them to the parent company in Britain. The transaction took place in Financial year 2010.
Transfer pricing is the practice of arm's length pricing for transactions between Group companies based in different countries to ensure a fair price one that would have been charged to an unrelated party is levied.
The High Court had said "in our opinion there is no taxable income on share premium received on the issue of shares."
The tax authority had issued a show cause notice to Vodafone India on January 17, 2014 and later passed an order asking it to pay additional Rs 3,200-crore tax for allegedly undervaluing the shares of its Pune BPO. On January 27, Vodafone moved the High Court challenging the I-T order and contended that its transaction on transfer of shares was not taxable under the Indian tax laws.
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